Friday, 18 May 2018

China Has Decided Russia Is Too Risky an Investment, BY MAXIMILIAN HESS

The
economics of a major oil deal seemed to make sense. But when energy companies
are arms of the state, economics aren't the only factor.

On May 4, the planned investment by the Chinese
company CEFC China Energy into Russian state oil giant Rosneft fell apart,
eight months after it was first announced. The tie-up’s failure reveals the
strict limits on the potential for energy cooperation between China — which is
in the process of taking ownership of CEFC — and Russia, and with it a broader
political alliance between the two countries.

Beijing has come to view Rosneft more as a tool
of the Russian state than a traditional oil company, and to the extent the two
countries don’t share political priorities, China has little interest in any
significant economic relationship. Although China is actively searching for new
political and economic partners around the world, it seems to have decided the
Russian government is too risky a political investment.

Rosneft makes little effort to disguise its
political motivations and its status as a major domestic political player
throughout the Vladimir Putin era. When Yukos, then Russia’s largest oil
company, was seized in 2004 following oligarch Mikhail Khodorkovsky’s fall from
grace, its assets were ultimately transferred to Rosneft. Rosneft subsequently
controlled 16 percent of domestic oil production. Today, the firm claims to produce
about 40 percent of Russia’s oil output.

Since Igor Sechin was named its CEO in May 2012,
Rosneft has increasingly become a foreign-policy instrument.
Sechin had previously overseen energy policy in his role as vice premier of
Russia, and he foreshadowed his future plans for Rosneft in negotiating with BP
over its Russian operations and by personally taking a leading role in
developing Russian-Venezuelan cooperation. Within a year of being named Rosneft
CEO, Sechin oversaw the purchase of BP’s Russian operations, resulting in the
British oil major taking a 19.75 percent stake in Rosneft itself. Sechin was
feted in London, and many in Moscow saw the deal as a way to align Russian and
Western interests.

Just one year later, Sechin found himself on
Western sanctions lists as relations between Russia and the West soured
following Moscow’s annexation of Crimea and invasion of Ukraine. That same
geopolitical shift brought Russia closer to China. President Vladimir Putin
famously traveled to China in May 2014, when he reportedly agreed
to Chinese pricing demands on a 30-year gas export agreement.

Russia’s shifting geopolitics coincided with
Chinese President Xi Jinping’s launch of the Belt and Road Initiative to invest
in and develop trade with dozens of countries, using China’s economic pull to
enhance its influence and deepen political ties. Rosneft, which had recently
agreed to double deliveries to China in one of the oil market’s largest-ever
deals, seemed poised to benefit. Meanwhile, the previously little-known CEFC
was launching its own foray into global markets, seemingly taking its cues from
Beijing.

Subsequent events attest that CEFC was following
the Belt and Road playbook of investing in locations that are strategically
significant for the Chinese state. CEFC’s first major foreign efforts came
through its heavy investments into the Czech Republic. The company’s founder,
Ye Jianming, was even named an advisor to Czech President Milos Zeman, who in
2015 was actively seeking to boost relations with Beijing. Ye was essentially
borrowing from Rosneft’s playbook. Chinese state holding company CITIC then
agreed to buy in to
CEFC’s Czech assets, though these are far removed from its core business.

CEFC also appeared to be executing Beijing’s
foreign-policy aims through another blockbuster deal when in May 2016 it agreed to
buy 51 percent of KMG International — a subsidiary of Kazakhstan’s state energy
giant, KazMunayGas. The deal was seen as crucial for Kazakhstan, where Xi had
launched the Belt and Road program, and which was suffering from its own
economic slowdown. CITIC is reportedly considering
buying in to its stake in Abu Dhabi’s onshore oil concession as well, in which
the state-owned China National Petroleum Corp. is already invested.

All this raises the question of why the
investment into Rosneft — although professedly also in the spirit of Belt and
Road — has now been allowed to collapse. When the $9.1 billion deal was
announced in September 2017, it appeared to be a new crest in the burgeoning
Russian-Chinese energy partnership. Much coverage of CEFC since Ye’s detention
in late February and speculation into CEFC’s downfall has focused on the
significant debts the company amassed. CEFC’s debts may have been cumbersome,
but Russia’s state-owned VTB offered to provide much of the financing for the
tie-up, though Beijing could easily have done so as well.

Beijing was also clearly willing to deepen its
oil ties with Moscow — in 2016, Russia displaced Saudi Arabia as China’s main
oil supplier, with the lion’s share being delivered by Rosneft. Just days
before the deal’s cancellation, it was reported that
a separate five-year supply contract between Rosneft and CEFC, agreed last
November, was being adjusted but would continue. However, a direct CEFC
investment into Rosneft proved a bridge too far.

Rosneft’s geopolitical machinations ultimately
are to blame for the CEFC deal’s collapse. Sechin has allowed Rosneft’s debt to
balloon as it seeks to counteract the cost of U.S. sanctions, continuing his
mission of prioritizing potential geopolitical reward over financial risk.

While Beijing’s willingness to continue
financing the Venezuelan regime appears to have been exhausted,
Rosneft has only doubled down. Just last September, Rosneft agreed to
make multibillion-dollar loans to Iraqi Kurdistan, less than a month before its
independence referendum. Conversely, China has avoided overtly involving itself
in Iraq’s internal squabbles. Furthermore, Rosneft’s effective takeover of
India’s Essar Oil, finalized last June, allies the oil giant with New Delhi.
This may ultimately provide geopolitical rewards to Moscow, and CEFC’s stake
would likely not have been sufficient to influence Russian decision-making with
regards to one of Beijing’s main rivals.

The cost of Rosneft’s geopolitical machinations
has often been borne by its partners. Its shareholders have failed to see
returns comparable to other oil firms, even those also concentrated in Russia,
amid the oil-price recovery. Last month, BP CEO Bob Dudley joked that
he would have advised a younger version of himself to avoid Russia, though his
firm is very much still invested in Rosneft. Beijing appears to have heeded
that warning.

Nine years after Igor Sechin launched the first
bilateral commission on Russian-Chinese energy cooperation, his machinations
have demonstrated that cooperation’s limit. While China and Russia now describe their
relationship as “strategic partners,” the collapse of the CEFC tie-up
demonstrates that this is still some way off from an alliance.

About Me

Dr Shabir Choudhry has done extensive research on the issue of Kashmir and Indo Pakistan relations. He passed BA Honours in Politics and History, and Mphil in International Relations (title of the thesis, ‘Kashmir and Partition of India’); and title of his PhD thesis is ‘Kashmir- An issue of a nation not a dispute of a land’.

Apart from this Dr Shabir Choudhry passed Post Graduates Certificates in Education, and NVQ Assessor’s qualifications; and taught English in London.

Political Achievements

Founder member of JKLF (Jammu Kashmir Liberation Front established in 1977) and got elected as a Press Secretary in 1984.

Became its Secretary General in 1985, and resigned from this post in 1996.

Got elected President of JKLF and Europe in May 1999, and decided not to contest in elections of July 2001.

Said good - bye to the JKLF as it is in many groups and is largely seen as advancing a Pakistani agenda on Kashmir dispute, and set up a new party Kashmir National Party in May 2008.

.

At present, he is:

·Spokesman Kashmir National Party and Director Diplomatic Committee;

·Spokesman for International KashmirAlliance;

·Founder member and Director Institute of Kashmir Affairs;

Previously

·A founder Member and Trustee/ Director of London based registered charity, Kashmir Foundation International and resigned from this position in August 2001.

·Regularly take part in the Sessions of the UN Human Rights (Commission) now Council in Geneva; and address various conferences and seminars to oppose violence and highlight the Kashmir cause.

·Participated in a Round Table Conference on Kashmir, organised by Socialist Group of European Parliament in Brussels in 1993.

·Addressed as a Chief Guest in a seminar on issue of Mangla Dam during the UN Sub Commission’s proceedings in August 2003.

·Addressed as a key - note speaker in a seminar on the issue of Gilgit and Baltistan, organised by Association of British Kashmiris.

·Addressed as a keynote speaker on human rights conference in Paris in 1991.

·Addressed at CambridgeUniversity as a Chief Guest in a conference on Kashmir in 1990.

·Addressed as a keynote speaker at New Delhi conference on Kashmir, which was part of Track Two diplomacy in November 2000.

·In September 2008, addressed a Conference arranged by Interfaith International in Geneva, topic of which was:“Kashmir Issue, Terrorism and Human Rights”.

·Addressed as a speaker in a NGO Conference on Self - Determination in Geneva in August 2000.

·Addressed as a keynote speaker in a fringe meeting of Liberal Democrats at their Annual Conference in Brighton in 1995.

·Participated in World Human Rights Conference in Vienna in 1993.

·Before President Clinton's visit to India and Pakistan in 2000, lead a JKLF delegation to the State Department to discuss Kashmir dispute and situation in South Asia.

·Also had two rounds of meetings with senior State Department officials before President Musharraf’s meeting to Washington in June 2003.

·Apart from that had meetings with senior officials including Ministers of different countries, and also held many meetings with the State Department and Foreign and Commonwealth Office officials on number of occasions.

·Played important role in advancing a Kashmiri perspective on the issue of Jammu and Kashmir; and also helped Baroness Emma Nicholson with her report ‘Kashmir: present situation and future prospects’, which was adopted by the European Parliament in May 2007.

·Won first prize in an essay competition in Urdu in 1976. It was organised by High Commission of Pakistan in London, and title of the essay was 'Qaaid-e- Azam's role in Islamic History'.

·Apart from that have addressed conferences in Brussels, Geneva, Toronto, Islamabad, Delhi, and

Publications

·Got first Urdu novel ‘Fareena’ published at the age of eighteen.

·Second Urdu novel ‘Bay-Khataa’ which was about the problems of Asian youths living in UK published in 1983.

·Third Urdu book ‘Pakistan and Kashmiri struggle for independence’ published in 1990.

·Fourth Urdu book is also on Kashmiri struggle, 'Is an independent Kashmir a conspiracy?'

·Apart from that has twenty books and booklets published in English on various aspects of the Kashmiri struggle.

·Recent publications are: Kashmir dispute as I see it

·Different perspective on Kashmir

·JKLF visit to Pakistan Administered Kashmir

·Kashmir Needs Change of Heart

·If not self - determination then what?

·Emma Nicholson report- who has won?

·Struggle for independence, Jihad or proxy war (Introduction by Baroness Emma Nicholson)

·

Future publications

Following books were completed some time ago and shall be published in near future:

In Search of Freedom - My visit to Srinagar and Islamabad

Kashmir and Partition of India

A brief background

Dr Shabir Choudhry was born in a small village called Nakker Shimali (near Panjeri) in District Bhimber, Azad Kashmir. He went to UK in 1966, and like other people from the region, holds a dual nationality. He left secondary school in 1970 with no qualifications and began his life as a textile worker.

In 1975 he started part time studies and passed Matriculation from Government High School Panjeri, passed ‘O’ and ‘A’ levels from UK, and resumed full time degree course in 1981, and passed BA (Hons) in Politics and History in 1984.

He continued full time and part time jobs until he got his Mphil. He passed his PGCE (Post Graduates Certificate in Education) in 1990, and then started full time job as a Lecturer. Due to health problems he resigned from teaching in 1999. At present he is self - employed, provides private tuition, translation and interpretation and consultancy.

Through out his adult life he has actively worked for the cause of Kashmir, and even during long illness he effectively carried out his responsibilities as a leader of the JKLF, a ‘prolific writer’ and consistent campaigner of Rights Movement and peace in Jammu and Kashmir and South Asia.